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President Olusegun Obasanjo’s administration
prides itself as one committed toward
prudent and efficient management of resources in the downstream sector of the oil industry. But its alleged squandering of a whopping sum of about N90 billion on the rehabilitation of Nigeria’s four refineries in the past five years without tangible results on the domestic source of refined petroleum products has made nonsense of its sanctimonious posturing.
Newswatch investigations indicate that despite this colossal amount of money spent on revamping the refineries, none of them is functioning at optimal capacity. The four refineries are in terrible states of disrepair mainly due to neglect and poor maintenance.
The turn around maintenance, TAM, of the refineries, which is supposed to be carried out every two years in addition to a mini TAM every year, have not been done by the present administration.. Even the contracts for TAM that were awarded at the inception of the Obasanjo administration which he inherited from the late General Sani Abacha and General Abdulsalam Abubakar were shoddily executed. The reason for the shoddy job was to ensure that the refineries do not achieve optimal performance. It was also meant to allow for the continuous importation of petroleum products by oil marketers said to be cronies of Obasanjo and other political jobbers.
Gani Fawehinmi, SAN, radical Lagos lawyer told Newswatch that Obasanjo was conniving with the oil merchants to import petroleum products and sell at exorbitant price instead of making the refineries function. “Who are the marketers? Are they not the people at the corridors of power in Abuja, cohorts of government functionaries?,” he asked. He noted that unless the refineries were reactivated and the cartel of oil marketers broken, Nigerians would continue to be pauperised by incessant fuel price increases imposed on them by these marketers who make a lot of money from importation of the products.
Importation of petroleum products is subject to the volatility of the exchange rate of the naira to the dollar and the prices of oil at the world market. This appears to be the major issues at the root of the current confusion within the nation’s oil sector. The mere fact that oil prices in the world market have since this year fluctuated between $30,and $42 per barrel as opposed to $25 per barrel upon which the nation’s 2004 budget was based has led to frequent increases in the prices of petroleum products by oil marketers in Nigeria.
The question many Nigerians have been asking is why Obasanjo has not sanctioned the contractors he claimed to have done shoddy jobs to serve as a deterrent to others. Newswatch investigations revealed that Obasanjo kept a blind eye to the extremely poor jobs by the contractors, particularly Chrome because Offor, its owner is a fellow party man.
Mojibayo Fadakinte, general secretary, Petroleum and Natural Gas Senior Staff Association told Newswatch that Obasanjo’s inability to sanction companies he claimed had done shoddy jobs has put a question mark on his administration’s avowed commitment to transparency and accountability. “There is what we call social contract between government and the govern. Transparency and accountability matter a lot for the government or a leader to have credibility. If you have spent a huge sum of money on a certain thing and you cannot get result for it, why don’t you explain to the people?,” Fadakinte said.
But Remi Oyo, senior special adviser to the President on Media denied this allegation last week. She told Newswatch that the president does not hoard information on petroleum matters. According to her, information about the refineries is in the public domain and Funsho Kupolokun, group managing director of the Nigerian National Petroleum Corporation, NNPC, is in the best position to give out the facts and figures. “That is not true. It is a free and open meeting. The president enjoys the confidence of his ministers. There is a lot of commitment at every meeting,” Oyo said in reply to the question that the president keeps to heart all information pertaining to petroleum and the refineries without letting members of the cabinet know at FEC meetings.
On the allegation that the names of the contractors involved in the TAM are not known to the public, government claimed to have recently published their names. Edmund Daukoru special adviser to President Obasanjo on Petroleum resources confirmed to Newswatch in Abuja last week that Total and Chrome were the major beneficiaries of the Turn-Around Maintenance projects in the nation’s refineries. Total was awarded the Kaduna Refinery contract while Chrome Consortium said to be owned by Emeka Offor, a PDP stalwart, got the contract for the Port Harcourt refinery. Daukoru declined to speak on the cost of the contracts but said that barring unforeseen engineering problems, the refineries would be ready in August this year.
Emmanuel Azu Agboti, Senate; committee chairman on Petroleum (downstream) admitted that the federal government has committed the sum of $700 million (about N90 billion) to the turn around maintenance of refineries in the past five years but has nothing to show for it. He told Newswatch that the committee has toured all the refineries but was not satisfied that the despite the huge investment on them, they are not working. Agboti explained that the names of the contractors who executed the TAM were known and the Senate committee was planning to investigate the contractors who did shoddy jobs. “My committee will do its investigations. It is deeper than you may think. We will have to retain consultants who understand refineries very well, to explain to us what is happening…
What is, however, glaring is that Obasanjo appears to have resolved to privatise the refineries instead of rehabilitating them. He said during a recent media chat that privatisation was the only way out of the prevailing situation whereby the refineries do not work despite draining the nation’s treasury. This is in line with the deregulation of the downstream sector of the oil industry which the present administration embraced since last year.
But government’s efforts to attract major oil companies in both Nigeria and abroad to bid for the refineries appears to have hit the rocks. Bala said recently that most of the major oil companies have not shown interest in the sale of the refineries. He is, however, determined to go ahead with the privatisation process in accordance with the mandate given to him by the president. The BPE boss said the agency would kick-start the sale of the refineries beginning with the Port Harcourt refinery.
Samuel Ogbemudia, retired general and former military governor of the defunct Bendel State is also in support of the deregulation of the downstream sector of the oil industry. He told Newswatch that the problem with the refineries is lack of planning. He believes that the existing refineries have not been able to meet national demand because it keeps increasing by the day.
Experts in the industry, however, contend that the federal government ought to have revamped the nation’s ailing refineries before deregulation and privatisation. To them if government had rejuvenated the refineries to perform at installed capacity before the reforms in the industry, the incessant fuel crisis would have be averted.
Apart from the problem of revamping and privatising the existing refineries, the take-off of the 18 newly licenced private refineries has equally been problematic. Newswatch learnt that of the 18 private refineries licensed more than a year ago, only three or four of them have cleared their sites. Atobiloye attributed the slow pace of commencement of work by the new refineries to lack of the requisite finance by the licenced firms and logistics. “Can you guarantee the supply of crude? Even after refining at what price can you sell? If the government is fixing the price right now, do you want to run the business at a loss? “ he asked. The executive director of Cakasa Nigeria Company Limited believes that until the Nigerian environment becomes conducive, investors may not be ready to go into the building of new refineries which is capital intensive.
Newswatch learnt that many of the winners have complained that the conditions stipulated for operating the licences were not favourable to them. Some of them contend that the non allocation of crude oil supply certificates with the licences had scared their technical partners from the project.
Another major problem is funding since the project is capital intensive. It is estimated that to build a refinery in Nigeria will require not less than $1 billion and some of the licenced company can hardly afford it.
Foreign investors who would have assisted them developed cold feet when they realised that Nigeria is a high risk investment entity. The nation has low credit rating and high risk on investment.
Coupled with this is the problem of perennial crisis in the Niger Delta region which produces the oil resources.
Besides, Lawal Yar’Adua, managing director, IDSL believes that another major hiccup is that some Nigerians given the licence were given either on sentiments or on fake business documentation.
For Akanade Kunmi, an oil refinery expert, the Nigerians refineries could be transformed to produce at installed capacities if the government exhibits a high sense of sincerity of purpose. “There has to be sincerity of purpose on the part of everyone. There has to be discipline and attitudinal change,” he said.
Jackson Dikibo, an energy consultant, said the problem with Nigeria’s refineries is that the business is very technically complex. “The moment you subordinate its operation to political and non-economic criteria, you impair its operational integrity and efficiency. And there are many ways in which political considerations have taken over our refineries,” he said.
This factor identified by Dikibo has been largely responsible for the killing of the refineries, the geese that lay the proverbial golden egg in the past five years of the Obasanjo administration.
Additional reports by Maureen Chigbo, Chuks Ehirim, Anza Phillips, Philip Oladunjoye and Annette Edo.
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